Generational change reshaping small business as Baby Boomers retire

There are plenty of businesses up for grabs, according to a new report.Source:Supplied

SMALL business is undergoing a generational change with more opportunities for young entrepreneurs to move in as the Baby Boomers start to move out.

The market has seen a growth in small and medium companies for sale, particularly in education and training, food and hospitality, leisure and entertainment, and import-export wholesaling.

Sales were strong in the March quarter and “retirement” was the dominant reason, according to the latest report by the Australian Institute of Business Brokers (AIBB).

Business brokers help get buyers and sellers together for transactions which in 2013 were worth $2 billion.

“Retirement has become the major reason given by sellers for many businesses being put on the market so perhaps we are seeing the start of the long predicted transition of the Baby Boomer generation,” said the institute.

And it seems a new generation is looking for bargains.

One broker surveyed is quoted saying: “More prospective buyers ... willing to borrow and dream again about their future. Banks willing to look at deals again and deals actually getting across the line.”

The institute calculated it was a buyers’ market in all states bar Tasmania and South Australia, and reported there were more sellers than buyers.

Strongest interest was in the food and hospitality and service-related sectors. The sluggish sectors were retail, health and beauty, and franchises.

An AIBB survey found 66 per cent of sales came about because owners wanted to put their feet up and 18 per cent were put down to “burnout reasons”. Both indicate a significant generational change is underway in small business.

“This should come as no surprise as we are at the leading edge of Baby Boomer retirement outcomes,’’ the AIBB report stated.

But young entrepreneurs might have to move quickly as big corporations are picking up small outfits.

“Also of note during this quarter there appears to have been an almost equal number of purchases by corporations rather than individuals,” the institute said.

“This could signal the release of pent up demand built during 2013 by corporations who now feel that the returned political stability and economic environment provides an opportunity for expansion.”

In the March quarter — pre May Budget — some 31 per cent of business brokers reported an increase in offerings on the market while 38 per cent said there was no change.

This reversed the trend for the final quarter of 2013 and defied the usual practice of a quiet market during the holiday period.

The report found:

• There are more business sellers than buyers

• Buyers have a lot of choice among similar businesses

• Buyers are making offers lower than the asking price

“Sale prices of businesses have generally held up during this quarter with the time taken to sell listings not changing much from the previous quarter,” the report said.

“There are more buyers returning to the market with more inquires this quarter but the availability of finance is still a major hurdle to completing transactions as is the expectations of vendors regarding pricing.”

Bret Bowden, chairman of the institute’s Biz Stats Committee said “we believe that the market for selling businesses will continue to improve during 2014 but bridging the gap between buyer and seller expectations will still challenge the skills of our members”.